The coronavirus-ravaged U.S. economy is expected to take any shape of recovery – V, U, W, L, I or K – from the ongoing recession.
While V refers to a steep decline followed by quick recovery of the economy, U-shape indicates long recovery time (in months). Meanwhile, W indicates quick recovery but a second decline, a scenario known as double-dip recession. Further, L and I are the worst-case scenarios, where recovery takes years. K is the latest to join the list, which indicates that one branch of the economy is advancing while another is declining.
On Jun 8, the Business Cycle Dating Committee of the National Bureau of Economic Research announced the beginning of a recession, led-by the coronavirus pandemic and related lockdowns and shelter-in-home guidelines that resulted in severe decline in employment and production levels.
Since then, the shape of economic recovery has been debated by pundits. The chances of a V-shaped recovery increased following a swift recovery in stocks in May after a plunge into bear market in mid-February. Unprecedented government stimulus and reopening of the economy were the primary drivers.
However, the Fed’s gloomy outlook amid fears of a second wave of coronavirus outbreak somewhat dampened the swift recovery sentiments. Although chances of a V-shaped have not been ruled out (depends on the availability of an effective vaccine), a number of analysts and market observers believe the economy is more likely to see a W-shaped recovery. (Read More: Market Recovery to Be Like "Rolling W's"? Value Stocks to Buy)
Here we discuss five stocks that have shown great resilience amid the pandemic. Apart from having solid fundamentals, these companies have significantly low debt levels. These factors make them well-poised for further growth despite the shape of economic recovery.
Moreover, these stocks have a favorable combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Per the Zacks proprietary methodology, stocks with such a perfect mix of elements offer solid investment opportunities.
Notably, each of these stocks has a market cap of more than $5 billion and has returned more than 25% on a year-to-date basis.
Zoom Video Communications ZM is riding on the coronavirus-induced work-from-home and online-learning trend. Easy to deploy, use, manage and solid scalability make this Zacks Rank #1 company’s software popular among customers. Moreover, its efforts to eliminate the security and privacy loopholes like “zoombombing” are expected to help maintain existing enterprise user base as well as attract customers.
This $70.88-billion company flaunts a Growth Score of A. The Zacks Consensus Estimate for its fiscal 2021 earnings is pegged at $1.18 per share, having been raised 174.4% in the past 60 days.
Debt-to-total capital currently stands at 6.5% compared with the Zacks Internet Software industry’s 33.7%. Shares of the company have returned a whopping 271.5% year to date.
Fortinet FTNT is benefiting from dominance in the Unified Threat Management (UTM) space, which is one of the fastest-evolving segments in the network security space. Moreover, this Zacks Rank #1 company is gaining from rising cyber-attack risks that are propelling demand for its FortiMail platform.
Fortinet, which falls under the Zacks Security industry, has no debt in its balance sheet. It has a Growth Score of B. The consensus mark for its 2020 earnings stands at $2.81 per share, having moved 8.1% north over the past 60 days.
Shares of this $23.09-billion company have returned 28.4% year to date.
MarketAxess Holdings MKTX benefits from steady rise in trading volumes that in turn drive commission. Growing adoption of the company’s automated trading tools for both liquidity providers and liquidity takers is a key catalyst. Moreover, this Zacks #1 Ranked stock with a Growth Score of B enjoys strong liquidity position and has witnessed continuous growth in free cash flow.
Debt-to-total capital stands at 10.8% compared with the Zacks Securities And Exchanges industry’s 19.7%.
The Zacks Consensus Estimate for its 2020 earnings is pegged at $7.08 per share, having been revised 8.4% upward in the past 60 days. Shares of this $19.68-billion company have returned 37% year to date.
Quidel QDEL shares have returned 176.2% year to date. The company received an amended emergency use authorization (EUA) from the FDA in June. This allows it to run Sofia SARS Antigen FIA, a rapid point-of-care test for COVID-19, on the Sofia Fluorescent Immunoassay Analyzer, its first-gen automated immunoassay instrument. Notably, Quidel received EUA for its Lyra Direct SARS-CoV-2 Assay and Sofia 2 SARS Antigen FIA test from the FDA in May.
Quidel currently flaunts a Zacks Rank of 1 and a Growth Score of B. The consensus mark for its fiscal 2020 earnings is pegged at $8.05 per share, having moved 163% north in the past 60 days.
Debt-to-total capital of this $8.81-billion company stands at 13.9% compared with the Zacks Medical-Products industry’s 36.7%.
Ollies Bargain Outlet Holdings OLLI is riding high on its “buying cheap and selling cheap” business model. Improving store productivity, expansion of customer reward program and cost-containment efforts are other positives. Notably, this Zacks #1 Ranked company’s loyal customer base is a key catalyst. In fiscal 2019, nearly 70% of sales came from Ollie’s Army members and the base of loyal members grew 13.3% during the year.
Ollies Bargain Outlet’s debt-to-total capital currently stands at 24.8% much better than the Zacks Consumer Products - Staples industry’s 75.2%.
This $6.62-billion company has a Growth Score of B. The Zacks Consensus Estimate for its fiscal 2020 earnings is pegged at $2.24 per share, having been revised 21.1% upward in the past 60 days. Shares of the company have returned 56.1% year to date.
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Quidel Corporation (QDEL) : Free Stock Analysis Report
Fortinet, Inc. (FTNT) : Free Stock Analysis Report
MarketAxess Holdings Inc. (MKTX) : Free Stock Analysis Report
Ollies Bargain Outlet Holdings, Inc. (OLLI) : Free Stock Analysis Report
Zoom Video Communications, Inc. (ZM) : Free Stock Analysis Report
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